The Canadian stock market has been on a roll since the last bit of 2025 and continued its momentum as 2026 began. As of this writing, the S&P/TSX Composite Index, which reflects the Canadian stock market’s performance, is up by almost 4% year-to-date.
During a bull market, it gets harder to identify undervalued growth stocks, especially with so many investors rushing to get into the hottest AI stocks the market has to offer. As January ends, we are seeing a certain choppiness in the market.
Despite the wider economic growth, pockets in the TSX are lagging behind the rest of the market. It might make sense to invest around $1,000 or so, especially if you have space left over in your Tax-Free Savings Account (TFSA).
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What stands out as the best investment right now?
Identifying the best pick for a TFSA right now can be challenging. If we look into the broader tech stock space, Constellation Software (TSX: CSU) is a name that I always consider. The incredible tech stock has delivered gradual but sustained growth for decades in an industry that is not known for that kind of growth. However, the once adored stock seems like it is falling out of favour with investors.
As of this writing, Constellation Software stock trades for $2,781.11 per share. It might seem like a high price tag, but CSU stock is heavily discounted right now. At current levels, it is down by around 47.5% from its 52-week high. The software juggernaut is finally seeing a collapse in its share prices after year of staying in the green.
Many believe that fears of artificial intelligence (AI) technology and what it is doing to the tech space are causing the crash. It’s true that AI-powered coding is fully disrupting the industry. It is easy to see why investors might want to take the profits they can and get out of risky investments.
Is the reaction overdone?
There is no denying the fact that AI is here to disrupt the markets, but does that justify the substantial fall from grace for CSU stock? It might be too soon to say for sure right now, but disregarding a market leader because of it might be too much. You can believe that AI technology will become more prevalent while being bullish on software companies, especially those leveraging the tech to improve their offerings and workflows.
Foolish takeaway
I firmly believe that AI is here to stay, and not just a temporary trend. I also believe that firms like Constellation can and will pivot to leverage the technology. As things stand, it seems that investors are taking money out of the stock as it it will be left behind in the AI revolution. I think CSU has the kind of economic moat to find its feet again and make the best of the developing environment.
It might be a good idea to nibble at its shares for your self-directed portfolio for now and await further pullbacks before investing. However, completely disregarding it at such attractive share prices might be a mistake you don’t want to make.
